Appeal - Loan agreement and mortgage - Whether the loan agreement and mortgage were unjust under s 76 of the National Credit Code - Securitisation program where third party correspondent assess creditworthiness of borrowers - Third party correspondent fabricated financial details in the loan application - Lender has constructive knowledge of fraud - Lender failed to inquire as to borrowers' capacity to repay loan - Lender did not observe operations manual under securitisation program
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Shannon v Permanent Custodians Ltd [2020] WASCA 198
Case
[2020] WASCA 198
Decision Date
CaseChat Overview and Summary
The matter before the court involved a dispute between Shannon, the borrower, and Permanent Custodians Ltd, the lender. The central issue was whether the loan agreement and mortgage entered into between the parties were unjust under section 76 of the National Credit Code. The dispute arose from a securitisation program where a third party, acting as a correspondent, assessed the creditworthiness of the borrowers. However, it was alleged that the third party fabricated financial details in the loan application, and the lender had constructive knowledge of this fraud. The borrower argued that the lender failed to inquire as to their capacity to repay the loan and did not observe the operations manual under the securitisation program.
The court was required to determine whether the loan agreement and mortgage were unjust and whether the lender's failure to observe the operations manual and inquire into the borrower's capacity to repay the loan constituted a failure to observe a responsible course of conduct. The court also needed to assess whether the lender had constructive knowledge of the fraud committed by the third party correspondent and whether this impacted the fairness of the loan agreement and mortgage.
The court found that the loan agreement and mortgage were unjust under section 76 of the National Credit Code. The court held that the lender had constructive knowledge of the fraud committed by the third party correspondent and failed to observe a responsible course of conduct by not inquiring into the borrower's capacity to repay the loan. The court further found that the lender did not observe the operations manual under the securitisation program, which contributed to the unconscionability of the loan agreement and mortgage. The court concluded that the loan agreement and mortgage were unjust and ordered that they be set aside.
The court ordered that the loan agreement and mortgage be set aside and that the borrower be released from any liability under the loan agreement. The court also ordered that the lender pay the borrower's costs of the proceedings. The decision highlights the importance of lenders observing responsible lending practices and the potential consequences of failing to do so.